2024 (11) TMI 1138 - AT - Service Tax

Service tax under renting of immovable property - renting of residential quarters by a government corporation to employees of contractors for residential purposes - renting of the residential dwelling for use as residences listed in negative list - invoking extended period - HELD THAT - We find that the appellant have given their residential quarters to the employee of contractor for residential purpose. It is admitted fact that the residential quarters are not used for any commercial purpose whereas, the same is used for only residential purpose. As per renting of residential quarter as listed in the negative list it is absolutely clear that any residential house given on rent for use as residence is not taxable service. In the facts of the present case, even though the residential quarter was given by appellant to the employee of the contractor but the fact remains the quarter is a residential dwelling and it is exclusively for use as residence. Therefore, in view of the clause ( m ) of Section 66 D this service is in negative list and the same is not taxable. As per Senior Accounts Officer, M.P.Power Generating Co. Pvt. Ltd. 2017 (4) TMI 952 - CESTAT NEW DELHI the renting of quarters to the employee of contractor is not liable to service tax. Moreover, the appellant is a government corporation and there cannot be any malafide intention to evade service tax. Therefore, the extended period is not invokable in the fact of the present case. Hence, the demand is also not sustainable on the ground of time bar. Appeal allowed.

Summary

Issues:
Whether the renting of residential quarters by a government corporation to employees of contractors for residential purposes is liable to service tax under the Finance Act, 1994 during the period of April 2015 to June 2017.

Analysis:
The case involved the appellant, a government corporation engaged in the generation of power, providing staff quarters to employees and contractors for residential purposes. The issue was whether this activity attracted service tax under the Finance Act, 1994. The department argued that renting residential quarters fell under declared services and was taxable. The appellant contended that during the period in question, renting residential dwellings for use as residences was listed in the negative list, hence not liable to service tax. The appellant also argued that as the quarters were solely used for residential purposes, they were not taxable. The appellant cited a judgment from the Delhi Tribunal to support their position.

The Tribunal examined the submissions and found that the appellant had indeed provided residential quarters exclusively for residential use, not commercial purposes. Citing Section 66 D (m) of the Finance Act, 1994, which lists services by way of renting residential dwellings for use as residences in the negative list, the Tribunal concluded that such services were not taxable. The Tribunal referred to a previous judgment involving a similar issue, where it was held that the mere fact that employees of contractors occupied the residential quarters did not automatically make the activity taxable. The nature of the usage of the property determined its taxability, not the status of the occupants. The Tribunal held that the impugned order upholding the tax liability was not legally tenable and set it aside, allowing the appeal with consequential relief.

Furthermore, the Tribunal noted that the appellant being a government corporation, there was no malicious intent to evade service tax, making the extended period not applicable in this case. Therefore, the demand for service tax was also deemed not sustainable on the ground of time bar. Consequently, the impugned order was set aside, and the appeal was allowed.

In conclusion, the Tribunal ruled in favor of the appellant, holding that the renting of quarters to employees of contractors by the government corporation was not liable to service tax under the Finance Act, 1994. The judgment emphasized the importance of the actual usage of the property in determining tax liability and highlighted the relevance of the negative list provisions during the specified period.